India Stocks Hit New High

Indian stockbrokers
monitor share prices on the National Stock Exchange (NSE)
terminal at a brokerage firm in Mumbai on July 3,
2014.Punit
Paranjpe/AFP

Indian equities climbed to a fresh high Monday for the second
time in less than a week as parliament opened ahead of a budget
expected to see the announcement of long-term reforms.

The Bombay Stock Exchange's key benchmark index, the Sensex,
climbed 0.6 percent to 26,116.73 after reaching a high of
25,981.51 points on Friday.

"People are looking at the budget as the start point of a
continuous reform process," said Harendra Kumar, head of
brokerage Elara Capital in Mumbai.

Economists expect the budget to contain a credible outline of
steps to steer India from a subsidy-laden, bureaucratic culture
to a more business-friendly investment climate.

Since winning a landslide election in May, Prime Minister
Narendra Modi has announced some tough, long-pending measures
such as a rail fare hike.

While there has been a public outcry, India's financial markets
have reacted positively to Modi's attempts to start overhauling
an economy saddled with slow growth and weak public finances.

The Sensex has risen more than eight percent since Modi took
office in June and more than 23 percent in 2014 as it became
increasingly likely that his right-wing Bharatiya Janata Party
would emerge victorious in the elections.

Still, analysts say Modi will struggle to shrink a yawning fiscal
deficit and add that he faces the challenge of spiraling
inflation as food prices soar on the back of a weak monsoon.

"We expect the main policy push to materialize only next year
once the administration is firmly established and has dealt with
near-term challenges such as poor rains," said HSBC in a note
last week.

"Once adopted, it will also take some time before the reforms
yield their expected growth dividend," it added.

Growth has slowed from near double-digits a few years ago to 4.7
percent in 2013, marking the second straight year of sub-five
percent expansion, hit by high interest rates, falling investment
and wage-eroding inflation.